Goodwill hunting
MONEY MARKETING - 8TH MARCH 2007
Britishinsurance.com managing director Simon Burgess says the payment protection insurance market is coming under heavy fire from customers over charges and needs to launch its own offensive to nurture goodwill and show the worth of its products
High-street banks are fighting a ferocious rear-guard action against customers claiming back charges levied over recent years. What started as a skirmish has developed into a full-blown war.
In the end, as so often in life, it is likely to be Mr 2.4 children who suffers as the banking fraternity uses the episode to put an end to the free banking enjoyed by around 80 per cent of current account holders.
Whether the consumer tide that has surged against banks could have been prevented is hypothetical but it is hard to imagine that decisive action earlier in the conflict and a more conciliatory attitude would not have at least resulted in a more peaceful stand-off.
Whether financial providers and distributors have learned anything from the fight for fees remains to be seen. However, given that a similar punch-up took place with credit card providers and the penalty fees they were charging before things boiled over with current accounts, it seems unlikely.
Individual payment protection insurance policyholders beating a path to the door of their provider to resolve their complaints have not got any real satisfaction and some have generated no reaction from high-street providers.
Despite high-profile market investigations and criticisms, there has been little done to address concerns but if there is one thing that consumers have on their side, it is weight of numbers. Once enough people feel aggrieved, nothing will stop them complaining and the power they wield is mighty.
It is worth noting that complaints over payment protection insurance are minimal at the moment but they will rise and could hit very significant levels.
A recent report from Defaqto says that around 5 million payment protection insurance policies have been sold since FSA regulation came into force, representing around £11bn in premiums.
If 1 per cent of the customers who bought a policy each year made a successful claim for mis-selling, this would mean £55m-worth of premiums heading back into people's pockets.
Even if these complaints were not successful, they would total around 200,000 a year, creating admin headaches for providers and the ombudsmen.
The payment protection insurance market needs to consider its position and, before it is too late, start its own offensive to improve its reputation and prevent complaints arising in the future.
This action must be credible if, as Defaqto suggests, issuing market statistics relating to claim frequencies, acceptance rates, claim ratios and declination reasons is going to be successful.
Firms may be reticent about releasing such information but associations representing the industry should be looking to put such statistics together and encourage members to alter their processes to deliver figures that will help rather than hinder.
It is not a case of fudging the figures but of seeing how practical action can have a direct impact on the image of the market.
By taking the time to highlight instances where payment protection insurance has delivered for clients, the industry should show potential clients how it can work for them and, more important, target the people that need it most.
The worst thing the payment protection insurance market can do is ignore its detractors. There are issues to be dealt with. There have been problems and it will take time for things to improve significantly. However, if we show a little willing, the goodwill and patience generated will be invaluable.
Driving a positive public relations campaign will require access to information and willingness to change some of the practices.
It must have the weight of the industry squarely behind it. If we cannot be bothered, then complaints will grow and we will all be left wondering just how much momentum they will gather.
